EDC Tries Again For Business Tax Incentives

By Steve Bigham

The Economic Development Commission (EDC) is hoping to gain the support of the Legislative Council this summer for its proposed business incentive plan. The program went before the council more than a year ago, but received a lukewarm reception by members, some of whom are hesitant about offering “corporate welfare” to prospective businesses.

But EDC members point out that tax deferrals or abatements are just one component of the plan. It also offers companies in-kind services or infrastructure improvements. The program, designed to help attract responsible business to town, does not need council approval. However, the council has the final say on any business incentive plan offered to individual businesses.

“We don’t want to institute a program if the council doesn’t consider it worthwhile,” explained First Selectman Herb Rosenthal. “We could do it without the council, but it doesn’t make any sense to put this into place unless the council is willing to go along. All it does is give people false hope. The Board of Selectmen would not adopt a program if the Legislative Council did not support it in concept.”

Five years ago, former first selectman Bob Cascella offered both Neumade Products and Sonics & Materials certain tax breaks if the firms came to town. The companies came to town only to discover that council members were opposed to giving them any sort of tax break. Eventually, the council reluctantly gave both these companies some tax savings.

That particular business incentive plan was suspended when Mr Rosenthal took office a few months later and there has been no program in place since. Meanwhile, other towns are using their programs to their advantage, attracting companies that might have otherwise come to Newtown, according to the EDC.

Under state statutes, a municipality can offer tax breaks to businesses on a case-by-case basis. However, a town’s legislative body has the final say.

“The EDC believes the town should have a specific plan in place. I don’t have a strong feeling either way. I just want some direction from the council,” Mr Rosenthal said. “I’m hoping they’ll put it on an upcoming agenda.”

Last year, none of the council members seemed vehemently opposed to the plan, but neither was there much enthusiasm for the plan. Some, like council chairman Pierre Rochman, admitted they never favored these types of programs, pointing out that they need to generate a lot of development to have a significant impact on the town’s tax rate.

This week, Mr Rochman said tax abatements are only beneficial in certain situations, like in cities that have old, abandoned buildings that pay nothing in taxes.

“We haven’t got any such situations in Newtown,” he said. “I need to be convinced it is going to make a difference. At this point, I’m not.”

Others, like Peggy Baiad, have argued that Newtown must follow suit with other area towns who offer similar incentive plans to prospective businesses. Doug Brennan wondered what the legal ramifications might be if the council chose one business over another. A lengthy discussion ensued regarding the validity of such a program.

The Board of Selectman in March of 2000 voted in favor of the proposed “business incentive program.” The program is designed to offset residential growth with business growth. Some town officials believe the temporary loss in revenue created by this plan is worthwhile in order to achieve the tax base increase.

Unlike the “tax deferral program” proposed five years ago, the new plan offers more than just tax breaks to prospective new businesses. According to EDC Chairman A. Winthrop Ballard, the new program would include subsidized physical improvements to the sites, such as the paving of driveways, tree branch material, street and road work, sewer and water hookups, and other in-kind services. Tax abatement requests would be based on the estimated assessment of the property after improvements. The EDC has included a long list of stipulations, including a clause that states that after final approval of any incentive agreement, work on the approved program must begin within 12 months and shall be completed within 24 months.

The highest savings would go to a business with a net gain of the assessed value of $5 million or more. Under that scenario, the business would stand to receive a 30 percent tax savings the first year, 25 percent the second year, 30 percent the third year, 15 percent the fourth year, and 10 percent in year five.